Podcast
Questions and Answers
What is the latest time a clearing member must pay an amount due to JSE Clear?
What is the latest time a clearing member must pay an amount due to JSE Clear?
Which of the following is NOT included in the net amount a trading member shall pay to or receive from the clearing member?
Which of the following is NOT included in the net amount a trading member shall pay to or receive from the clearing member?
In terms of JSE Clear rules, when must a clearing member pay the variation margin after being notified of a mark-to-market?
In terms of JSE Clear rules, when must a clearing member pay the variation margin after being notified of a mark-to-market?
Regarding payment procedures, what must be agreed upon between a trading member and a clearing member?
Regarding payment procedures, what must be agreed upon between a trading member and a clearing member?
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What type of fees must be included in transactions involving interest rate and currency derivatives?
What type of fees must be included in transactions involving interest rate and currency derivatives?
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Who acts as a settlement agent concerning payments to and from JSE Clear?
Who acts as a settlement agent concerning payments to and from JSE Clear?
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With whom must a clearing member have a clearing agreement to manage the positions of other trading members?
With whom must a clearing member have a clearing agreement to manage the positions of other trading members?
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What is the role of JSE Clear when a clearing member's client position is marked-to-market?
What is the role of JSE Clear when a clearing member's client position is marked-to-market?
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Which of the following best describes the purpose of initial margin in the context of JSE Clear?
Which of the following best describes the purpose of initial margin in the context of JSE Clear?
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What conditions can lead JSE Clear to call for cash payments from market participants who have pledged securities?
What conditions can lead JSE Clear to call for cash payments from market participants who have pledged securities?
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In which scenario would the holder of a long position in a futures contract need to report a purchase using the JSE trading system?
In which scenario would the holder of a long position in a futures contract need to report a purchase using the JSE trading system?
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What does the mark-to-market procedure involve at JSE Clear?
What does the mark-to-market procedure involve at JSE Clear?
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Which of the following correctly represents what can occur when margin requirements change for a trading member?
Which of the following correctly represents what can occur when margin requirements change for a trading member?
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How are pledged securities treated if a trading member wishes to substitute them?
How are pledged securities treated if a trading member wishes to substitute them?
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What is the role of JSE Clear in margin payments procedures?
What is the role of JSE Clear in margin payments procedures?
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Which statement accurately reflects how margin restoration procedures operate?
Which statement accurately reflects how margin restoration procedures operate?
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What is the latest time by which a payment due to a clearing member must be paid?
What is the latest time by which a payment due to a clearing member must be paid?
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What must a client do to exercise an option contract registered in their name?
What must a client do to exercise an option contract registered in their name?
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Which fees are included in the net amount a non-resident client must pay upon opening a position?
Which fees are included in the net amount a non-resident client must pay upon opening a position?
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What is the consequence of a client’s long position upon executing an option?
What is the consequence of a client’s long position upon executing an option?
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What must a trading member do to exercise options registered in the name of a client?
What must a trading member do to exercise options registered in the name of a client?
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When must the additional margin as referred to in trading contracts be paid?
When must the additional margin as referred to in trading contracts be paid?
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What can offset any amount due from a resident client related to their positions?
What can offset any amount due from a resident client related to their positions?
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What implications does a non-residential client face regarding the payment of variation margin?
What implications does a non-residential client face regarding the payment of variation margin?
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What is included in the total amount the client must pay upon opening positions?
What is included in the total amount the client must pay upon opening positions?
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What action must the holder of a long position in a futures contract take upon expiry?
What action must the holder of a long position in a futures contract take upon expiry?
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Under what condition can JSE Clear autonomously mark-to-market positions in any IRC security?
Under what condition can JSE Clear autonomously mark-to-market positions in any IRC security?
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What type of margin must be provided by trading members when the risk of loss changes?
What type of margin must be provided by trading members when the risk of loss changes?
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Which statement correctly reflects the treatment of pledged securities under JSE Clear rules?
Which statement correctly reflects the treatment of pledged securities under JSE Clear rules?
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What does the expiration condition entail for an option contract relative to the futures contract?
What does the expiration condition entail for an option contract relative to the futures contract?
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When can initial margin payments be called for by JSE Clear?
When can initial margin payments be called for by JSE Clear?
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What is the primary purpose of marking-to-market at JSE Clear?
What is the primary purpose of marking-to-market at JSE Clear?
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What must a market participant do if they have pledged securities but wish to substitute them?
What must a market participant do if they have pledged securities but wish to substitute them?
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What is the primary condition under which a trading member may require a resident client to deposit additional margin?
What is the primary condition under which a trading member may require a resident client to deposit additional margin?
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What is one role of the variation margin in futures and options contracts?
What is one role of the variation margin in futures and options contracts?
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How does JSE Clear manage interest payments related to margin held?
How does JSE Clear manage interest payments related to margin held?
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What is the purpose of the retained margin related to a resident client?
What is the purpose of the retained margin related to a resident client?
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What might trigger a trading member to require restoration of additional margin from a client?
What might trigger a trading member to require restoration of additional margin from a client?
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What is necessary for a trading member to retain initial margin or variation margin payable to a client?
What is necessary for a trading member to retain initial margin or variation margin payable to a client?
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When can a clearing member impose a requirement for additional margin from a trading member?
When can a clearing member impose a requirement for additional margin from a trading member?
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What constitutes the maintenance margin level for a client with additional margin deposited?
What constitutes the maintenance margin level for a client with additional margin deposited?
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What occurs to a long position in an option contract when it expires at a strike price not better than the underlying instrument's expiry price?
What occurs to a long position in an option contract when it expires at a strike price not better than the underlying instrument's expiry price?
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Which statement is true regarding the position management by JSE Clear in case of clearing a transaction?
Which statement is true regarding the position management by JSE Clear in case of clearing a transaction?
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When a transaction in a futures or option contract is cleared, what role does JSE Clear play?
When a transaction in a futures or option contract is cleared, what role does JSE Clear play?
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What is the status of contract pricing for futures contracts at expiration according to JSE Clear?
What is the status of contract pricing for futures contracts at expiration according to JSE Clear?
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What happens if a transaction clears when there is no position already held in a futures or option contract?
What happens if a transaction clears when there is no position already held in a futures or option contract?
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Under what condition does JSE Clear treat a long position as if it has sold futures contracts?
Under what condition does JSE Clear treat a long position as if it has sold futures contracts?
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What is the default price for an option contract sale or purchase at expiration?
What is the default price for an option contract sale or purchase at expiration?
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Which of the following statements about closing out positions is incorrect?
Which of the following statements about closing out positions is incorrect?
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What type of fees can a trading member levy on its clients?
What type of fees can a trading member levy on its clients?
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In which situation must a clearing member remit interest received to the trading members?
In which situation must a clearing member remit interest received to the trading members?
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What is required for a trading member to levy a fee for trading with a client as a principal?
What is required for a trading member to levy a fee for trading with a client as a principal?
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What is included in the net amount a clearing member pays to or receives from JSE Clear with respect to non-resident clients?
What is included in the net amount a clearing member pays to or receives from JSE Clear with respect to non-resident clients?
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Which parameter is considered when determining the trading fees for transactions in bonds?
Which parameter is considered when determining the trading fees for transactions in bonds?
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What limitation is placed on the application of trading fees on the positions of clients?
What limitation is placed on the application of trading fees on the positions of clients?
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What is the role of JSE Clear concerning the collection of trading fees?
What is the role of JSE Clear concerning the collection of trading fees?
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What must a trading member do regarding trading fees charged to clients?
What must a trading member do regarding trading fees charged to clients?
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What must a client do to ensure timely payment to a trading member?
What must a client do to ensure timely payment to a trading member?
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Which of the following actions can a client take regarding the exercise of an option contract?
Which of the following actions can a client take regarding the exercise of an option contract?
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What is the ultimate deadline for a trading member to pay the amount due to the clearing member after receiving a payment from the client?
What is the ultimate deadline for a trading member to pay the amount due to the clearing member after receiving a payment from the client?
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When a long position is exercised by a client, what is the client's position regarding the underlying instrument?
When a long position is exercised by a client, what is the client's position regarding the underlying instrument?
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What fee components are not included in the net amount payable by a non-resident client?
What fee components are not included in the net amount payable by a non-resident client?
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What determines when a client must pay the variation margin after the position has been marked-to-market?
What determines when a client must pay the variation margin after the position has been marked-to-market?
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What happens if a trading member has a proprietary long position in an option contract?
What happens if a trading member has a proprietary long position in an option contract?
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What must happen to an amount due to or from a trading member?
What must happen to an amount due to or from a trading member?
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Variation margin is paid only by a trading member to a clearing member after marking-to-market of a position.
Variation margin is paid only by a trading member to a clearing member after marking-to-market of a position.
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A trading member is allowed to retain any margin or interest payments without informing the client beforehand.
A trading member is allowed to retain any margin or interest payments without informing the client beforehand.
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Additional margin must always be equal to the initial margin according to the clearing agreement.
Additional margin must always be equal to the initial margin according to the clearing agreement.
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JSE Clear is responsible for remitting interest from margins held to the trading members no later than the second day of the month after interest is accrued.
JSE Clear is responsible for remitting interest from margins held to the trading members no later than the second day of the month after interest is accrued.
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The maintenance margin level must be restored when additional margin has been used for variation margin payments.
The maintenance margin level must be restored when additional margin has been used for variation margin payments.
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Any trading member can demand additional margin from a resident client regardless of the client agreement.
Any trading member can demand additional margin from a resident client regardless of the client agreement.
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Retained margin can only be used for future transactions if the client has not traded with the trading member within a period exceeding sixty days.
Retained margin can only be used for future transactions if the client has not traded with the trading member within a period exceeding sixty days.
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A trading member may remit interest received to clients at any time during the next month.
A trading member may remit interest received to clients at any time during the next month.
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The JSE levies different trading fees for transactions in bonds compared to other securities.
The JSE levies different trading fees for transactions in bonds compared to other securities.
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A clearing member may refuse to process a trading member's transactions if additional margin is not promptly deposited as per the agreement.
A clearing member may refuse to process a trading member's transactions if additional margin is not promptly deposited as per the agreement.
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A clearing member can charge additional fees on a principal transaction without prior written agreement from the client.
A clearing member can charge additional fees on a principal transaction without prior written agreement from the client.
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The sum of the initial margin is included in the net amount to be received from JSE Clear only for resident clients.
The sum of the initial margin is included in the net amount to be received from JSE Clear only for resident clients.
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Clearing members are not responsible for any fees associated with the trades of their clients.
Clearing members are not responsible for any fees associated with the trades of their clients.
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Monthly in arrears is the term used for when the clearing member pays interest for the current month.
Monthly in arrears is the term used for when the clearing member pays interest for the current month.
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The variation margin is a type of fee that must be paid by clients for transactions involving currency derivatives only.
The variation margin is a type of fee that must be paid by clients for transactions involving currency derivatives only.
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A trading member must adhere to a schedule of fees determined by themselves without any external oversight.
A trading member must adhere to a schedule of fees determined by themselves without any external oversight.
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A long position holder in a futures contract must always report a purchase of the underlying bonds upon expiry.
A long position holder in a futures contract must always report a purchase of the underlying bonds upon expiry.
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Mark-to-market positions are evaluated at 15h30 on every business day by JSE Clear.
Mark-to-market positions are evaluated at 15h30 on every business day by JSE Clear.
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Initial margin payments can only be made in cash and not through securities pledged to JSE Clear.
Initial margin payments can only be made in cash and not through securities pledged to JSE Clear.
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JSE Clear can independently mark-to-market positions in any IRC security only if it deems it necessary based on market conditions.
JSE Clear can independently mark-to-market positions in any IRC security only if it deems it necessary based on market conditions.
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Pledged securities may be substituted or withdrawn without any conditions under JSE Clear rules.
Pledged securities may be substituted or withdrawn without any conditions under JSE Clear rules.
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Once an option contract expires, the strike price has no impact on the futures contract's expiry price.
Once an option contract expires, the strike price has no impact on the futures contract's expiry price.
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Market participants may be called for cash payments at any time if their pledged securities are withdrawn.
Market participants may be called for cash payments at any time if their pledged securities are withdrawn.
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The information regarding margin payments is solely based on the financial status of the trading member.
The information regarding margin payments is solely based on the financial status of the trading member.
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The variation margin must be paid by a client before the expiry time of the option contract.
The variation margin must be paid by a client before the expiry time of the option contract.
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A trading member with a long position in an option can exercise the option only if it is registered in the client’s name.
A trading member with a long position in an option can exercise the option only if it is registered in the client’s name.
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Payments due to a trading member from a client must be made without any specific time agreed upon between both parties.
Payments due to a trading member from a client must be made without any specific time agreed upon between both parties.
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The strike price is the price at which the option holder is deemed to have bought or sold the underlying instrument upon exercising the option.
The strike price is the price at which the option holder is deemed to have bought or sold the underlying instrument upon exercising the option.
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The retained margin can be used to offset any amount due from a non-resident client.
The retained margin can be used to offset any amount due from a non-resident client.
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A client is only allowed to exercise an option contract using written notice.
A client is only allowed to exercise an option contract using written notice.
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JSE Clear must receive payments by no later than 10:00 on the day following when they accrued.
JSE Clear must receive payments by no later than 10:00 on the day following when they accrued.
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The additional margin can be paid after the standard variation margin is settled.
The additional margin can be paid after the standard variation margin is settled.
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JSE Clear becomes the counterparty to both the buyer and the seller after a transaction is cleared.
JSE Clear becomes the counterparty to both the buyer and the seller after a transaction is cleared.
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A long position in an option contract is deemed to have sold futures contracts if the strike price meets the expiry price conditions.
A long position in an option contract is deemed to have sold futures contracts if the strike price meets the expiry price conditions.
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The price of an option contract upon expiry is considered zero in the context of settling futures contracts by JSE Clear.
The price of an option contract upon expiry is considered zero in the context of settling futures contracts by JSE Clear.
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A position in a futures contract is always closed out once a transaction has been cleared by JSE Clear.
A position in a futures contract is always closed out once a transaction has been cleared by JSE Clear.
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JSE Clear applies its clearing rules automatically to both futures and option contracts.
JSE Clear applies its clearing rules automatically to both futures and option contracts.
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The number of futures contracts deemed bought by a short position matches the number of options in the position upon expiry.
The number of futures contracts deemed bought by a short position matches the number of options in the position upon expiry.
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Positions registered under a trading member can only be increased through subsequent clearing transactions.
Positions registered under a trading member can only be increased through subsequent clearing transactions.
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When there is no existing position, a new position is registered with JSE Clear at the time of transaction clearance.
When there is no existing position, a new position is registered with JSE Clear at the time of transaction clearance.
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Study Notes
Non-Resident Client Payments
- Clients must settle net amounts with trading members, including initial margins, additional margins, variation margins, and transaction fees for interest rate and currency derivatives.
- Payments to exchange members should ensure timely compliance with clearing house deadlines, specifically by 10:00 AM on the business day following the accrual date.
- Variation margin payments must adhere to the rules set by JSE Clear and be communicated to clients by trading members.
Exercise of Option Contracts
- Clients holding long positions in options may exercise their options until the expiry time by notifying their trading member verbally or in writing.
- Trading members with proprietary long positions exercise options by executing the trade on the JSE trading system, either directly or on clients' instructions.
- Option exercise results in the automatic purchase or sale of the underlying instrument at the strike price, as designated by JSE Clear.
- If an option expires better than the underlying futures’ price, it is automatically deemed exercised.
- On expiry of physically settled futures, long position holders must report purchases, while short position holders must report sales of underlying instruments as per IRC settlement rules.
Mark-to-Market Procedure
- Positions in IRC securities for all trading members and clients are marked-to-market at 17:30 daily or at a time determined by JSE Clear.
- JSE Clear retains the authority to mark-to-market any IRC security positions if market conditions necessitate further assessments.
Margin Requirements
- Initial margin must be adjusted by trading members or clients whenever there are changes in risk exposure, as evaluated by JSE Clear.
- Payments for initial margins can be made in cash or via pledging securities, subject to JSE Clear regulations.
- Securities initially pledged can be substituted with other qualifying securities, following the proper rules set by JSE Clear.
- JSE Clear can demand immediate cash payments from market participants to fulfill margin obligations if securities are withdrawn or substituted.
- All amounts due must be settled by 10:00 AM on the business day following accrual, as mandated by JSE Clear rules.
Clearing Member and Client Settlements
- Clearing members must pay variation margins for proprietary and client positions marked-to-market by JSE Clear at specified times.
- Trading members serve as settlement agents for their clients, facilitating payments due to or from JSE Clear based on trading agreements.
- Payments made between trading members and clearing members should consider the inclusion of initial margin, additional margin, variation margin, and transaction fees tied to interest rate and currency derivatives.
Clearing Process
- JSE Clear is responsible for clearing derivative securities trades executed on the JSE trading system’s central order book and off-book transactions reported and matched within the system.
- Clearing involves JSE Clear acting as the counterparty: replacing the buyer for the seller and vice versa after a transaction is cleared.
Position Management
- Futures or option contracts without prior positions are registered in the trading member's name during the clearing process.
- Positions in cleared transactions are adjusted: new positions can be opened or existing positions increased or closed out.
- On expiry of option contracts, specific conditions trigger obligations to deem sales or purchases of futures contracts at the designated expiry price.
Mark-to-Market
- Positions in IRC securities get marked-to-market daily at 17:30 or other specified times by JSE Clear.
- JSE Clear can mark-to-market positions at any time if market conditions warrant this action.
Margin Requirements
- Initial Margin: Paid when risk of loss changes, can be in cash or pledged securities, ensuring compliance with JSE Clear rules.
- Variation Margin: Required when positions change due to marking-to-market or closing out positions.
- Additional Margin: Clearing members may request more from trading members per their agreements, and trading members can require additional margin from clients.
- Retained Margin: Trading members may require residents to deposit money for initial or additional margins and can retain margins for future trades under certain conditions.
Interest Payments
- JSE Clear manages and invests margins and sends out net interest to clearing members monthly, allowing them to remit interest to their trading members and clients.
Fees Structure
- Trading fees are charged for trades executed on the JSE, determined by the JSE Executive and may also be passed down to clients.
- Bond transactions incur separate fee structures, also decided by the JSE Executive.
Payment Procedures
- Fees and margins must be paid to JSE Clear by trading members for their clients’ positions, including:
- Initial margins
- Variation margins
- Trading, clearing, and settlement fees.
- Client obligations for variation margins and other fees must be met within stipulated times.
Exercise and Assignment of Option Contracts
- Clients can exercise long positions in option contracts upon expiry via verbal or written notification to their trading members.
- Trading members must execute exercises on the JSE trading system, also for client instructions, completing the terms of the contract and transferring the underlying instrument at the specified strike price.
Clearing Process
- JSE Clear is responsible for clearing derivative securities trades executed on the JSE trading system’s central order book and off-book transactions reported and matched within the system.
- Clearing involves JSE Clear acting as the counterparty: replacing the buyer for the seller and vice versa after a transaction is cleared.
Position Management
- Futures or option contracts without prior positions are registered in the trading member's name during the clearing process.
- Positions in cleared transactions are adjusted: new positions can be opened or existing positions increased or closed out.
- On expiry of option contracts, specific conditions trigger obligations to deem sales or purchases of futures contracts at the designated expiry price.
Mark-to-Market
- Positions in IRC securities get marked-to-market daily at 17:30 or other specified times by JSE Clear.
- JSE Clear can mark-to-market positions at any time if market conditions warrant this action.
Margin Requirements
- Initial Margin: Paid when risk of loss changes, can be in cash or pledged securities, ensuring compliance with JSE Clear rules.
- Variation Margin: Required when positions change due to marking-to-market or closing out positions.
- Additional Margin: Clearing members may request more from trading members per their agreements, and trading members can require additional margin from clients.
- Retained Margin: Trading members may require residents to deposit money for initial or additional margins and can retain margins for future trades under certain conditions.
Interest Payments
- JSE Clear manages and invests margins and sends out net interest to clearing members monthly, allowing them to remit interest to their trading members and clients.
Fees Structure
- Trading fees are charged for trades executed on the JSE, determined by the JSE Executive and may also be passed down to clients.
- Bond transactions incur separate fee structures, also decided by the JSE Executive.
Payment Procedures
- Fees and margins must be paid to JSE Clear by trading members for their clients’ positions, including:
- Initial margins
- Variation margins
- Trading, clearing, and settlement fees.
- Client obligations for variation margins and other fees must be met within stipulated times.
Exercise and Assignment of Option Contracts
- Clients can exercise long positions in option contracts upon expiry via verbal or written notification to their trading members.
- Trading members must execute exercises on the JSE trading system, also for client instructions, completing the terms of the contract and transferring the underlying instrument at the specified strike price.
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Description
This quiz explores the financial obligations and trading regulations that non-resident clients must adhere to when interacting with trading members. Key concepts include initial margin, additional margin, variation margin, and various fees associated with trading activities. Test your understanding of these essential financial principles.
